Income Tax and National Insurance

Income Tax and National Insurance Pre Budget 2009

by Ashley Clark, Director

There where dramatic changes to tax and national insurance contributions and allowances in the pre-budget report for 2009

• Personal Allowances Frozen for 2010/11
• 1% Employer National Insurance Increase from 2011/2012
• 1% Employee National Insurance Increase from 2011/2012
• National Insurance rates unchanged for 2010/2011. Upper and lower limits have been frozen for 2010/2011. The lower limit will be increased by £570 in 2011/2012.
• 50% Income Tax Band confirmed for people with taxable income over £150,000 from 2010/2011
• 50% Income Tax Band confirmed for trusts with taxable income over £150,000 from 2010/2011
• Personal Allowance Reduced by £1 for every £2 earned over £100,000 from 2010/2011 (if you earn £112,950 you will have ZERO personal allowance – real tax rate of 60%). Pension contributions can be used reduce income below the £100,000 income limit to preserve personal allowance. Consider salary sacrifice.
• 42.5% Tax for Dividend Income from shares or 'stock related' instruments for Higher Rate Tax Payers